Should to pay your child's course fees?

[MollyHuaCha]

Just that really. Students now start repaying their loan once they earn more than £25k per year.

If you can afford to fund your child's course fees and living expenses in order for them to avoid taking out a student loan, should you do it?

Any thoughts...???

blueshoes
I think you misunderstood what I was trying to say.
Yes the interest accrues on the loan in the normal way.
What is not like a normal loan is the repayment.
Your repayments are not calculated according to the size of the loan but rather according to your earnings.
Very high earners will pay off the loan but the majority of graduates will just pay 9% extra "tax" for 30 years.
I am old enough to have paid tax in my younger years at 35% when personal allowances were also much smaller.
No earnings above current threshold of £21k = zero repayment.
If after 30 years you never earned more than £21 you never pay anything back. This could easily happen. Health, lifestyle career prospects are not set in stone. Your bright ambitious teen may decide to go down a different path than you expect.

We paid the fees (get some help with this as part of Dh's employment package) for ds's BA, and we are now funding his MA. Ds had no loans for his BA, neither will he for his MA. I don't believe that the terms and conditions on the loans won't be changed at some point, and as paying for education has no IHT implications, unlike gifting monies for a deposit, we prefer to do that.

Scaryteacher how do you think the loan conditions could change?

*My problem with Martin Lewis and the analyses above is that they seem very accountancy driven. Assuming someone has some spare money, choice on how it is spent/saved should be driven by personal preferences. What gives most individual satisfaction.
*
Of course its up to the individual what they do with their money. But surely its much better make an informed decision based correct financial analysis than not?

The write off after 30 years could be altered; the interest rate changed; repayment thresholds lowered or raised (mine was changed); these things aren't set in stone, much as you all like go think they are. It's not like a mortgage or a bank loan. Given that part of the loan book has already been sold off, what's to stop terms and conditions being changed at that point?

Accountants seem to see things in entirely monetary terms.

Instead satisfaction derived from money depends on a range of things. Individual attitude to debt, the value of money now vs money later, your view on invidual vs society, attitude to risk, and so on.

We dislike debt, prefer to pay in advance, and feel awkward about low earning tax payers subsidising us. We will derive great satisfaction from having our DC leaving University debt free and are happy to wait for the new car and flash holiday. So paying fees is a sensible decision for us.

Accountants seem to see things in entirely monetary terms.

Thats their job. actually, my own views are quite similar to yours, need - but having worked through the figures with different scenarios DH and DD thought differently.

Darn it, needsmoresleep has sussed me out !
I do have rather a tendency to run DCF calculations for such things

I am not an expert but there is quite a lot of work done on consumer psychology. Things like getting more satisfaction from experiences than from things. And saving for things (lots of pleasure to be gained from anticipation) rather than immediate consumption using credit.

And everyone is different. People who charge by the hour, lawyers etc, have a different approach to the value of free time generally. Most of us put quite a high value on leisure. And so on.

In short there is no right answer as to different saving/borrowing/consumption choices. Accountants can crunch numbers, but that does not answer the question. I choose to pay the fees, and am content that is the right choice for me. Others might prefer not to work, or spend the money on a very posh handbag, or save for a deposit.

I cannot afford to pay the fees.
It is really that simple.
I have no pension so need to have a buffer.
Many, many people have neither.

I full funded the older 3 children (as my parents did me by the way - I only got a £50 a year grant and the full grant for the 15% of us who went to university in my day was £900 so my parents made that sum up at some expense to them). I am funding the twins in full (£150k over the next 3 years).

I agree with needmore's reasons above and I just see it as an extention of £16k a year school fees anyway so I might as well carry on. you could argue it is for the good of the less fortunate that I pay so I relieve the state and other tax payers of the burden of educating my children. We should be better a discount. I paid £17k today by the way for fees and rent for one of the twins. Expensive day.

I also fund their first properties so it's not an either or for me.

Also most of them will probably earn a lot - their lawyer sisters in Lodnon are well into 40% tax paying in their 20s etc. Don't assume lenders ignore student debt by the way - they asked my children for details of everything including cost of meals out, and had they had them childcare costs etc.

Finally if you earn just over £100k or whatever that bracket is your marginal tax rate is 63%. Add 9% graduate student loan tax on that too and you are up there at over 70% marginal rate of tax.

Most people have no choice so the loans work out fine for them. Never has it been so easy and cheap to get to universityu by the way. In my day 85% could not go. of the 15% left many had no full grant and parents who refused to make it up to the full one and no student loans. totally stymied. Now anyone no m atter how badlky off can get all their fees paid and most of their rent by hard working tax payers and many will not pay it back, the lucky little so and sos. I hope they appreciate it. One man used the whole of his student loan to fund his trip to fight for ISIS.

DH an I attended Uni in the days when 5% of kids went
when state school kids were a definite minority - DH went to a comp.
He is the only non selective / private school person among my friends of that time ..... at least half were Private school

Grants were cool - even those of us with "City" parents got enough to cover the 29 week hall fees and a fair bit of beer

Tuition fees were not something we even thought about
we got housing benefit in the holidays on our digs

and DH and I bought out first (3 bed Victorian terrace in the South East) house for £30k soon after we graduated

Anybody who thinks that students today have a better deal
really needs to think more deeply about it.

Students today have far more opportunity than when 5% went to university. Nowhere in the world would you be able to access say 50k in unsecured loans for a 3 year course (even at 10% interest). There is no doubt that students today have a much better deal than the 5% from 40 years ago.

As for asset prices, they reflect the false market we have had for 10 years, as well as the fact that we live in one world. Apart from prices adjusting when the older demographics bite into housing supply, is it really wrong that anyone be open to competition from other human beings some of whom achieve more/less? The answer is always to get better, not unsustainable protectionism.

Minimum wage £10 per hour, £400 a week, £20000 a year. If you lived a student's lifestyle, you'd save enough within 5 years to get by, and be comfortable topping up your funds when studying. By all means take the loan as a buffer if you wish, knowing you could pay it off any time when you finish, and save a small fortune in interest. All around the world, that's how it's done. And in so doing that would-be student almost certainly learns more in useful life skills than going straight from school, spending other people's monies, some planning to never repay a gift that should be life-changing.

I would not be surprised at a much higher 'graduate tax' rate being levied in future. The lower the tax rate for graduate loans, the more other taxpayers have to pay for nothing of worth to them, or to the student.

maryso
Minimum wage £10 per hour,
Which country?
Not the UK
Try nearer £5 per hour for youngsters and NEVER full time

I won't pay fees, but I expect to have to top up the maintenance loan, as dc are unlikely to qualify for the full amount (we are middleish earners). So I anticipate having to find £3,000 per year per child. Saving hard.

The point is in the past most people could not go and now many many more can and in the past I might not have been able to go if parents would not pay for me (as there were no loans and I would not get more than £50 for rent when the full grant was £900). Most young people always think their tiem is the worst in history, nothing new there. However all we can all do is make the best of the situations we are in.

I think the current interest rate is 6% on these loans (it is 9% on ordinary private post grad loans by the way). So if you are on £100k like my off spring you would indeed as someone says above out of you 9% of wages a month be paying capital and interest back whereas lower earners may only ever pay interest for 30 years and then the loan is written off. So as someone said above we reward those who pick degrees which are not that much use and we penalise those who make wise career choices - it's all very bizarre. So our £100ker would be paying £9000 a year or 750 a month and probably would pay off their loans over the 30 years and would be advised to save up and pay them off ASAP.

I am perfectly happy with my decision to let the children graduate debt and loan free but I can see the argument the other way and most people have no choice and their children manage fine.

The changes will cost the nation billions and mean those who fund our children through university are funding that too. Pity we don't get a refund by the state of some of the fees we paid up front or something but there never is much reward for those who pay most into the system. Ever thus. From she who gives is more taken.

(..her?.....)

sadly so many go to university a degree is almost worthless especially if it is not backed with related co-op type work. the benchmark is always changing and some are left with huge debts in their name and not much improvement in their employment options.

I think viewing uni as improving employment options is fair enough but misses another important point a bit. Universities are great for self-development and a great step into adult life + student life is fun. I think it's a worthwhile experience whatever career/job you have afterwards. I'd want my children to do it even if they then have one of the lower paid careers afterwards.

JoJo, yes but in that case if that is likely then the parent may be better off (financially at least) not bothering to help them with the costs and letting them take full loans.

Universities are great for self-development and a great step into adult life + student life is fun.

I am not sure that these are good reasons for taxpayer subsidy.

The stupid idea to send everyone to university in order to reduce youth unemployment is surely the root of this problem. Teenagers are being told they "need" a degree and employers are sticking a degree onto a list of requirements for jobs that absolutely don't need degrees just as an arbitrary filter.

There is no way 50% of 18 year olds are suited to degree level study, or that 50% of jobs can only be done well by graduates.

Has anyone read the dystopian novel Little Brother in which parents get their houses repossessed if their adult children default on their student loans? Fiction but extrapolated from the fact student debt can already be bundled and resold, fees and penalties and the interest spirals. The situation with student loads in America is crazy, seems likely England will follow the same path...

I hate the idea of going into debt for uni. When I went to uni, I was lucky and got a full grant + no fees. As the first from my low income family to go to uni there is no way I would have done so if I had had to borrow money to do so. However, I'm not paying DCs fees (although I do top up their (minimum) loans). It is entirely likely that my younger DCs paying 9k a year + won't be aiming for highly paid jobs so won't pay a lot back. And if they do, they will be able to afford the repayments.

The stupid idea to send everyone to university in order to reduce youth unemployment is surely the root of this problem.

Agreed.

There are no easy answers. Suddenly increasing fees which started out as £1k a year which my daughters paid to now £9k so quickly has been very unfair on families. In the US you know from the day that baby is born you are starting to save for the college fund. in the UK we had no such 18 year warning, did we?

Whilst I agree those earning over £25k or even the £100k some of our lawyer children earn or will earn can afford an extra 9% it is a big chunk of income. Most people find for a lot of their life most of their income goes on tax, NI and rent or mortgage and then particularly in big cities vey very high full time childcare costs. There is not a spare 9% hanging around for most of these people. If they had anything spare they would be wanting to pay it into a pension.

Anyway I am the fool - funding the children plus paying a lot of tax which funds people who will never pay it back - double paying as ever.